Nepa: On the weaker side, but larger cost savings than expected bodes well for profitability
Research Note
2023-03-17
08:37
Redeye concludes that Q4 was weaker than expected. Revenue was 5% below expectations, where recurring revenues was on the weaker side and ad hoc revenues in line with expectations. On the positive side, marketing optimization (the company's focus area) grew decently. Adjusted EBIT (excl. one-off costs for cost-cutting program) was weaker than expected, as an effect of lower revenues and lower gross margin. Q1 sales has started with a small revenue decline y/y. A big positive is that the company's cost-savings program will save 31m annually, compared to Redeye's previous assessment of 24m. Redeye will reduce its valuation range by c10%.
JVK
FR
Jesper Von Koch
Fredrik Reuterhäll
Total revenue was SEK76.3m, -3% y/y and below our estimates of SEK79.9m. Slower growth in recurring revenues than expected explains the deviation. Adjusted EBIT (excl. one-off costs for cost-cutting program) was SEK0.7m, corresponding to an EBIT margin of 0.9% (14.1% last year). This was below our estimates of SEK4.2m. Lower sales and lower gross margin than expected explain the deviation.
Source: Redeye, Nepa
All in all, the report was rather weak and the short-term outlook is also weak. However, we think these things are more than reflected in the share price. Considering today's low valuation, we think the report is ok, and we are especially positive to the company's cost savings being bigger than we had estimated.
As a result of the report, we will lower our estimates on short-term sales by c5-10%. Regarding more long-term sales estimates, we will lower these somewhat.
As a result, we will likely adjust our Base Case downwards by about 10%.
Disclosures and disclaimers